How to Invest in Funds UK – Invest in Funds Today!

Fact Checked by Gary McFarlane

Funds offer a convenient way to access a wide range of stocks within one investment. There is a market to suit everyone – but to invest in funds in the UK, you need to find yourself a good broker.

Today, we shorten the learning curve by explaining how to invest in funds in the UK. We also list the best funds available and offer a full breakdown of the top brokers to sign up with for this purpose.

#1 Broker to Invest in Funds UK – eToro

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How To Invest in Funds UK – Choose a Broker

The only way to invest in funds in the UK is via an online broker. Below you will find a selection of UK brokers that allow you to invest in funds with ease.

  • eToro – Overall Best Place to Invest in Funds UK
  • Capital.com – Trade Funds at 0% Commission
  • AvaTrade – Credible Broker to Trade Funds With Leverage

Full reviews of the above brokers can be found further down in this guide.

How to Invest in Funds UK – A Quick Guide For 2021

If you are looking to skip our detailed guide and simply want a quick overview of how to invest in funds in the UK – follow the steps below. In doing so, you can invest in your chosen fund at eToro without needing to pay a single penny in commission.

  • Step 1: Open an Account with eToroHead over to the eToro website and open an account. This will require you to enter some personal information.
  • Step 2: Upload Your ID – Upload a copy of your government-issued ID – such as a passport or driver’s license. You can do this later if your fund investment amounts to less than $2,250 (about £1,600).
  • Step 3: Deposit Funds – Deposit some funds into your eToro account via a debit/credit card, e-wallet, or bank transfer. The minimum at eToro amounts to just $50 (about £36).
  • Step 4: Search for Fund – Click on the ‘Discover’ button, followed by ‘ETFs’. You can then view which funds eToro offers. Next, click on the ‘Trade’ button next to the fund you want to invest in.
  • Step 5: Invest in Fund – You will now need to enter the value of your fund investment. This needs to be at least $50. Once you are ready to confirm your investment – click on the ‘Open Trade’. button.

That’s it – you have just invested in a fund at eToro on a 0% commission basis. By heading over to your eToro portfolio, you can see how your fund investment is performing in real-time.

67% of retail investor accounts lose money when trading CFDs with this provider.

How to Invest in Funds UK – Choose The Best Funds

Learning how to invest in funds in the UK is one thing, but you will also need to decide which market to allocate your hard-earned money to. See a quick breakdown of the best UK funds to invest in below:

  1. Vanguard Total Stock Market Index Fund ETF – Top Fund With Exposure to Thousands of US Stocks
  2. SPDR S&P 500 Index – Best Fund to Invest in 500 Mid and Large-Cap US-Listed Companies
  3. iShares Asia-Pacific Dividend UCITS ETF – Great Fund for Investing in Asia-Pacific Stocks
  4. iShares FTSE 100 UCITS ETF – Best Fund for Investing in the 100 Largest UK Companies
  5. iShares Core Dividend Growth ETF – Best Fund for Investing in Consistently Growing Dividends

Are you still making your mind up on what type of fund to invest in? Shortly, you’ll see further detail surrounding the above-listed funds. When you grasp how to invest in funds in the UK, this extra information should give you a clearer idea of which better suits your goals.

 67% of retail investor accounts lose money when trading CFDs with this provider.

Best Fund Investments UK – Full Analysis

There are hundreds of funds to choose from in the UK. As such, you need to do some research to consider the types of assets that the fund gives you access to, alongside the perceived risk and potential rewards.

To point you in the right direction, below you will find our analysis of the best investment funds to consider for your portfolio.

1. Vanguard Total Stock Market Fund ETF -Top Fund With Exposure to Thousands of US Stocks

When you are confident in how to invest in funds in the UK, you might look to go big and access large-scale US stocks. If this suits your financial goals – the Vanguard Total Stock Market Index Fund ETF could be the right choice. This fund was launched in 1992 and is a good way to gain exposure to thousands of US stocks under one investment. In fact, there are nearly 4,000 US stocks within this one fund.

Holdings in the Vanguard Total Stock Market Fund ETF include huge US companies like Apple, Amazon, Facebook, Microsoft, Google, Tesla, and many others. Notably, this ETF is listed on the NASDAQ. As such, when choosing the best broker to invest in funds in the UK – make sure the platform has access to US stock markets.

eToro Vanguard Total Stock ETF chart

This guide investigated the price history of this fund and compared its value from 2011. The Vanguard Total Stock Market Fund ETF has increased by around 267% in this time. It’s also a good idea to be aware of the sector weightings before you decide to invest in a fund.

See below:

  • Technology – 24%
  • Financial services – 13.77%
  • Healthcare – 13.64%
  • Consumer Cyclical – 11.83%
  • Communication services – 10.40%
  • Industrials – 9.39%

Basic materials, real estate, consumer defensive, utilities, and energy stocks make up between 2.29% and 5.77% per sector. As you can see, the Vanguard Total Stock Market Fund ETF is weighted by market cap. This means that firms with a larger market capitalization, like US tech giant Apple, will have a greater influence on the performance of the fund.

As such, if the stocks from within the fund rise or fall, the ETF will reflect this. If you decide to invest in this fund, you will also be adding US-based small and micro-cap companies to your portfolio.

This is a convenient way to diversify your portfolio. However, you should always carry out your own investigation before you invest in funds in the UK. Notably, eToro facilitates fractional investments and charges 0% commission on the Vanguard Total Stock Market Fund ETF.

67% of retail investor accounts lose money when trading CFDs with this provider.

2. SPDR S&P 500 – Best Fund to Invest in the S&P

With the right broker, it’s easier than ever to access international funds. On your quest to learn how to invest in funds in the UK, you won’t get far without mention of the SPDR S&P 500. The index that this fund tracks has been trading since 1926 and concentrates on US stocks, spanning around 24 industries.

As such, to invest in the SPDR S&P 500, you need a platform with access to the NASDAQ and the NYSE in the US. This ETF monitors the market price of 500 of the best-performing US stocks. Furthermore, the SPDR S&P 500 is a float-adjusted index. For those unaware, this means that stocks with lower liquidity will have a smaller weighting. This should make for a less volatile investment.

eToro SPDR S&P 500 ETF Chart

Some of the most liquid stocks featured in this fund include companies such as Berkshire Hathaway, Microsoft, Tesla, JP Morgan Chase, Amazon, Google, and NVIDIA. The fund manager will frequently rebalance the basket of US stocks accordingly. Any markets that are performing badly will be removed. The fund will be re-weighted so that the best-performing stocks continue to give good annual returns to investors.

When you invest in funds in the UK, you might be hoping for dividends? This guide found that the SPDR S&P 500 pays shareholders dividends on a quarterly basis and also pays capital gains. At eToro you will pay 0% commission to invest in funds such as the SPDR S&P 500. Furthermore, you can allocate as little as $50 to the investment.

67% of retail investor accounts lose money when trading CFDs with this provider.

3. iShares Asia-Pacific Dividend UCITS ETF – Great Fund for Investing in Asia-Pacific Stocks

If you want to invest in funds in the UK, but would rather gain exposure to exotic markets such as Asian stocks – look no further than iShares Asia-Pacific Dividend UCITS ETF. This fund tracks the top 50 companies based in eligible Asia-Pacific countries but is dominated by those in Hong Kong and Japan. This spans sectors such as financial services, real estate, utilities, communication services, and industrials.

The iShares Asia-Pacific Dividend UCITS ETF comprises companies such as Fortescue Metals Group Ltd, Power Assets Holdings Ltd, Spark New Zealand Ltd, AusNET, and PCCW Ltd. The aforementioned firms, and the other 45 holdings, are chosen because they have leading dividend yields. As such, when you invest in funds like this, you will receive periodic payments.

eToro Asia Pacific Dividend ETF Chart

Importantly, when you invest in funds focused on exotic markets, there will be increased volatility. With this in mind, you may want to consider fractional investments to reduce your risk of overexposure to such a volatile fund. The iShares Asia-Pacific Dividend UCITS ETF comes with an annual expense ratio charge of 0.59% per year. This is pricey compared with many other funds in the UK.

67% of retail investor accounts lose money when trading CFDs with this provider.

4. iShares FTSE 100 UCITS ETF – Best Fund for Investing UK Companies

If you want to invest in funds that are focused on UK stocks, consider the iShares FTSE 100 UCITS ETF. This fund tracks the 100 largest UK companies by market value. As such, should you decide to invest in this fund, you will be allocating capital to huge UK companies such as HSBC, Royal Dutch Shell, BP, British American Tobacco, Unilever, GlaxoSmithKline, AstraZeneca, and many other well-known brands.

eToro FTSE 100 ETF chart

To give you an idea of weighting in terms of sector, see below:

  • Consumer staples – 19.67%
  • Financials – 18.44%
  • Materials – 13.35%
  • healthcare – 10.47%
  • Industrials – 10.39%
  • Energy – 8.76%
  • Consumer discretionary – 8.32%

Sectors like communications, utilities, information tech, and real estate make up the rest of the fund, with weightings of 4.54%, 3.58%, 1.29%, and 1.20% respectively. Bear in mind that when you invest in funds, they are usually rebalanced quarterly. This is based on the performance of their holdings. As such, the weightings you see listed above are subject to change.

Notably, the iShares FTSE 100 UCITS ETF pays dividends, as well as capital gains. We elaborate on this later for anyone in the dark. This fund features further down the list than the SPDR S&P 500 -largely because it simply isn’t performing as well as its US counterpart.

67% of retail investor accounts lose money when trading CFDs with this provider.

5. iShares Core Dividend Growth ETF – Best Fund for Investing in Consistently Growing Dividends

If you want to invest in funds in the UK, with the goal of accessing consistently growing dividends – check out the iShares Core Dividend Growth ETF. Many people invest in index funds with the hope of receiving quarterly cash payments – and/or capital gains. The reason is not only the regular cash flow and reinvestment opportunities, but also the fact dividend-paying companies are usually well-established and less risky.

The most convenient way to access dividend-paying companies is to invest in funds that focus on them. The iShares Core Dividend Growth ETF is one such option to consider. The fund tracks an index of US dividend-paying companies. There are more than 390 weighted dividend stocks here, consisting of JPMorgan Chase, Microsoft, Apple, Verizon Communications, Johnson & Johnson, Pfizer, Proctor & Gamble, and more.

eToro Cire Dividend Growth ETF Chart

See a list of sector weightings below to give you a clearer indication of whether the contents of this ETF are in line with your investment goals:

  • Technology – 18.98%
  • Financial services – 18.47%
  • Healthcare – 17.55%
  • Industrials – 12.52%
  • Consumer defensive – 10.24%
  • Consumer cyclical – 7.42%
  • Utilities – 7.34%

The rest is made up of communication services, basic materials, and energy. The annual expense ratio is much less expensive than the aforementioned iShares Asia-Pacific Dividend UCITS ETF, coming in at just 0.08% per year. Not only that, but at FCA-Regulated eToro, you can invest in funds in the UK whilst paying 0% commission.

67% of retail investor accounts lose money when trading CFDs with this provider.

Best Place to Invest in Funds UK

Whether you are looking to invest in funds in the UK because you want access to a specific sector, or just want to diversify your portfolio – you’ll need a broker. Furthermore, you shouldn’t sign up to invest in funds without checking out a range of metrics – such as usability, fees, and supported markets.

To save you some legwork, below you can review our detailed analysis of the best brokers to invest in funds in the UK. We investigate everything from the platform’s fees and regulatory standing to fund variety and deposit types.

1. eToro – Overall Best Place to Invest in Funds UK

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eToro is the best overall place to invest in funds in the UK for numerous reasons. For your safety as an investor, this broker is covered by the Financial Services Compensation Scheme (FSCS) and is licensed and regulated by the FCA, ASIC, and CySEC. As such, there should be no apprehension regarding its legitimacy. The site is stress-free to use, which makes investing easy for people with all levels of experience.

One of the best things about eToro is that you can invest in a large range of funds at 0% commission. Regardless of the current price of your chosen fund, eToro supports fractional investments, so facilitates a minimum stake of $50 (around £36). We found funds to include all of those listed in this guide, as well as ETFs such as the iShares NASDAQ 100 UCITS, Vanguard Lon-Term Bond, iShares MSCI Emerging Markets UCITS, and others spanning many sectors.

index funds at eToro

The minimum amount required at eToro to invest in funds in the UK is just $50. When you are ready to fund your account and invest, take your pick from major credit and debit cards, e-wallets including PayPal, and bank transfers. Notably, you will be charged 0.5% of your deposit to convert British pounds to US dollars – which is highly competitive. eToro provides access to 17 exchanges globally, so there will be no shortage of options.

This includes funds listed in the UK, the US, Asia, and more. eToro covers the stamp duty fee, which is usually 0.5% per order. You may want to consider passive investing via Copy Trading. Filter candidates down by gains, markets, and more and you can passively mirror the trades of the person you invest in. For example, if you invest £1,000 into CopyMyFunds123 and they risk 4% on the Vanguard Total Stock Market Fund ETF, your portfolio will show a £40 allocation to the same.

Pros

  • Invest in stocks and ETFs at 0% commission
  • Minimum investment per trade from just $25
  • Supports debit/credit cards, e-wallets, and local bank transfers
  • Regulated by the FCA, CySEC, and ASIC
  • Used by over 20 million people
  • Perfect for beginners
  • Social and copy trading tools

Cons

  • Perhaps too basic for technical traders
  • No support for MT4 or MT5

67% of retail investor accounts lose money when trading CFDs with this provider.

2. Capital.com – Trade Funds at 0% Commission

capital.com review

The FCA, CySEC, ASIC, and NBRB regulate Capital.com, so conditions are deemed safe. This broker offers dozens of funds via CFDs (Contracts for Difference) with 0% commission. This means that you can trade renowned markets without taking ownership of anything. With this in mind, if you are keen to invest in funds as part of a long-term strategy, this won’t be the broker for you.

Nevertheless, if you think the fund will increase in value – you simply need to place a buy order. On the other hand, if you think a fund is going to fall in value, you can try to profit from this by going short with a sell order. If you like the idea of trading funds via CFDs short-term, you can leverage your trades by up to 1:5. This means if you have £100 to allocate to a fund, you might boost the position to £500.

capital.com review

Always proceed with care when using leverage. We say this because, if the market doesn’t behave as expected, leverage amplifies profits as well as losses. The minimum deposit is newbie-friendly £20 if you finance your account using a debit or credit card, or an e-wallet like Skrill. If you prefer to make a deposit using a bank transfer, you will need to fund your account with a minimum of £250 to trade.

Pros

  • Top-rated spread betting and CFD broker
  • Regulated by the FCA, ASIC, CySEC, and NBRB
  • Minimum deposit just $20 (debit/credit cards and e-wallets)
  • 0% commission on all markets
  • Tight spread and no deposit/withdrawal fees
  • Thousands of financial markets supported
  • Great for beginners

Cons

  • Advanced traders might find the platform too basic
  • Minimum deposit of £250 on bank transfers

78.77% of retail investor accounts lose money when trading CFDs with this provider.

3. AvaTrade – Invest in Funds via Leveraged CFDs

avatrade review

Much like the other two investment platforms we have reviewed, AvaTrade is regulated by several tier-1 bodies. The platform offers 0% commission on funds, which will be traded as CFDs. As we just mentioned, this is a short-term trading strategy, rather than an investment whereby you become a shareholder. The broker lists some of the biggest funds in the world, such as the S&P 500, but nowhere near as many as eToro or Capital.com.

AvaTrade will increase your position by as much as 1:5 if you add leverage. It has to be said, there aren’t many funds to trade on the native AvaTrade platform. As such, you will need to link your AvaTrade account to the third-party trading platform MT5 to access more markets. The aforementioned platform also includes free demo accounts and plenty of trading tools, such as price charts.

avatrade review

You will need to make a deposit of £100 or more to get started and trade funds at AvaTrade. You can fund your account using e-wallets like Neteller, well-known credit and debit cards, and wire transfers. Notably, the latter will delay your ability to trade funds by some days.

Pros

  • Regulated in seven jurisdictions
  • 0% commission on all supported markets
  • Offers spread betting and CFD instruments
  • Minimum deposit of just $100
  • Free demo account
  • Supports MT4 and MT5

Cons

  • Spread betting department limited to just 200+ financial markets
  • No support for instant bank transfers

Trading CFDs and FX Options entail risk and could result in the loss of your capital.

How to Invest in Funds UK: Choosing the Best Funds

Learning how to invest in funds in the UK is easy enough, but choosing one can be difficult.

See a quick guide on how to choose the best funds below. Although this will save you some time, you should also conduct research of your own before you invest in funds in the UK.

Target Market

In this guide on how to invest in funds in the UK, we have listed a range of different types. As we said, there is a fund for everyone. Each will target a different market.

For instance:

  • You might elect to invest in funds that track the highest performing US companies
  • Investors with a thirst for risk may choose funds that focus on emerging markets
  • Alternatively, you may look to invest in funds focussed on the healthcare sector
  • Some investors prefer to add UK companies to their portfolio

You should think about your own goals and what funds you might add to your portfolio to achieve them. Whatever type of market you wish to gain exposure to, it is important to carry out thorough research before you invest in funds. eToro offers access to tons of funds and stocks on a commission-free basis. When you invest in funds in the UK, the broker absorbs the stamp duty tax!

Risk

When you look to invest in funds in the UK, you should be aware of the risk involved. For instance, funds with lower volatility are considered a safer investment. An example of this is the iShares Core FTSE 100 UCITS ETF, which, as we said, tracks the top 100 companies in the UK.

Google FTSE 100 ETF Chart

At the other end of the scale are leveraged CFD funds. These can be considered riskier than investing in funds directly. As we touched on, if the underlying market moves against you, you are magnifying your losses.

Another fund that is considered riskier than the likes of FTSE 100 and S&P 500, is one focussed on the emerging markets. For instance, by investing in the iShares Asia-Pacific Dividend UCITS ETF – you will indirectly be buying shares in companies listed in volatile regions.

Past Performance

The historical performance can tell you a lot about a potential fund investment. Looking at this data could be a deciding factor on whether you want to invest in a particular fund to begin with, or give it a wide birth.

Furthermore, when you are researching how to invest in funds in the UK, and which one is right for you, there will be varying volumes of information available. This will usually depend on how established the fund is.

See an example of this below:

  • One of the longest-running funds in the world is the S&P 500
  • The S&P fund began trading in 1926. At the time with just 90 holdings, covering 20 utility, 20 railroad, and 50 industrial companies
  • By 1957, the index expanded, adding hundreds of more companies and renaming itself the S&P 500
  • The SPDR (Standard & Poor’s Depository Receipt) S&P 500 ETF was introduced in 1993
  • The ETF was, and is to this day, tasked with tracking the value of the S&P 500 index fund
  • All in all, there is almost 100 years of data available on the performance of this fund

Don’t be put off if the fund you are researching is much newer. For instance, the previously mentioned iShares Core Dividend Growth ETF was launched over 80 years after the now S&P 500. However, there is still heaps of information available. Plus, growth ETFs are great for diluting the risk incurred from more volatile markets.

Income or Capital Gains

When you invest in funds in the UK, you can grow your wealth in two forms – capital gains and dividends.

  • Put simply, capital gains refers to the profit generated from the selling of stock within the basket of assets (the fund)
  • This is when a fund is rebalanced and a company is removed from it
  • As such, holdings that are liquidated may produce a profit, if sold for more than they initially cost
  • In this case, a portion of the gains can be distributed to shareholders

Mutual funds are legally required to pay capital gains to shareholders on a regular basis. In contrast, some ETFs will not expose you to capital gains.

With that said, when you invest in funds in the UK, you will also have the option of an ETF that focuses on growing dividends – such as the aforementioned Shares Core Dividend Growth. eToro will allow you to invest in ETFs with 0% commission and you can allocate as little as $50 to the funds you are interested in.

Expense Ratio

As you learn the ins and outs of how to invest in funds in the UK, it’s important to be aware of the fees you might need to pay. The expense ratio is definitely one to look out for.

This is an all-inclusive fee charged by fund providers to cover things like operating expenses, customer support, processing withdrawals, and so on. As such, it is often referred to as a management expense fee.

When you invest in funds in the UK, the expense ratio you pay will depend on the liquidity of the underlying marketplace. For instance, if you are looking to invest in funds such as the S&P 500, or the FTSE 100, anything over 0.10% per annum is deemed expensive. Less liquid markets will come with a higher fee.

How to Invest in Funds UK – Detailed Walkthrough

To invest in funds in the UK, whether local or international, you should sign up with a regulated brokerage. For this walkthrough, we detail how to create an account at eToro – which is one of the best investment platforms in the UK.

This is because the broker absorbs stamp duty and allows you to invest in funds in the UK with 0% commission. Not only that – but eToro is covered by the FSCS. The platform also operates under the supervision of the FCA and other well-known bodies.

Step 1: Open a Trading Account

You can sign up for free to invest in funds in the UK at eToro. Press ‘Join Now’ on the main dashboard and you will be presented with a sign-up form. This is where you need to complete the required information. This includes your phone number, email address, first and last name, and username and password.

When you have accepted the terms and conditions, the FCA-regulated broker will ask for your address, tax number, date of birth, and a little trading history. This is standard practice and should only take a few minutes.

how to join etoro

Next, you can proceed to complete the KYC process. For this, attach a copy of a recently issued dated bank statement with your address on it, and a photo of your passport or driver’s license. Confirm all to proceed.

67% of retail investor accounts lose money when trading CFDs with this provider.

Step 2: Add Investment Funds

Financing your account to invest in funds in the UK is super-easy at eToro because there are many options available.

Deposit Funds

Supported payment types comprise the following:

  • Credit and debit cards issued by Mastercard, Maestro, and Visa
  • e-wallets from PayPal, Neteller, Skrill, and more
  • Bank transfers

As we mentioned in our earlier review, there is a small FX fee of 0.5% to pay when you make a deposit. However, this is offset by the fact the broker covers the stamp duty tax of the same percentage. The minimum deposit is a low $50.

Step 3: Search for a Fund to Invest in

At eToro, finding a suitable investment fund could not be easier. Either click ‘Discover’ to view all markets, or type your chosen fund into the search bar. Here, we are looking to invest in the Vanguard Total Stock Market Fund ETF, which as we touched on, tracks thousands of US shares.

eToro Vanguard Total Stock ETF Search

Find your chosen market and click ‘Trade’ to continue to the next step and invest in funds in the UK.

Step 4: Confirm Fund Investment

Enter the amount you want to risk on your chosen fund and enter the amount in the relevant box. We are placing an order valued at $50.

eToro Vanguard Total Stock ETF Buy Order

The minimum amount you can invest in funds at eToro is $50, and you will not have to pay any commission fees or stamp duty. We also found the spread to be economical. Click ‘Open Trade’ to confirm your order. Note that US markets trade between 2:30 pm and 9 pm – UK time.

How to Invest in Funds UK – Conclusion

It might be overwhelming learning how to invest in funds in the UK. However, it couldn’t be more simple if you select a low-cost broker with access to heaps of funds. When it comes to trusting a broker with your finances, the best will be covered by the FSCS and regulated by the FCA.

We found that eToro is the overall best place to invest in funds in the UK. This broker aids fractional investments, so you can place an order for as little as $50, regardless of the price of the fund.

The platform is regulated by the FCA and is covered by the FSCS. Furthermore, you will not pay any commissions or stamp duty to invest in funds and there are heaps of markets to choose from.

eToro – Best Platform to Invest in Funds UK

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  • Invest in a wide range of cryptocurrencies
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  • eToro crypto wallet included which makes it beginner-friendly
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About Kane Pepi PRO INVESTOR

Kane Pepi writes for several high profile publications such as InsideBitcoins, the Motely Fool, and Learnbonds. Based in Malta, Kane is extremely skilled at complex subjects related to financial matters - including a Bachelor’s Degree in Finance, a Master’s Degree in Financial Crime, and actively engaged in Doctorate Degree research, for the money laundering threats of the blockchain economy.